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Letter to BS: Jail term for CSR law violation is a retrograde step

According to a study by KPMG India, the expenditure on CSR by India's largest 100 firms stood at Rs 7,536. Rs 30 crore in the financial year ending 2018

Business Standard 

CSR
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This refers to the editorial “An unnecessary law” (August 6) about the imposition of imprisonment and fine for not meeting the target of spending the specified amount on (CSR). According to a study by KPMG India, the expenditure on CSR by India’s largest 100 firms stood at Rs 7,536. Rs 30 crore in the financial year ending 2018, up by 47 per cent from 2014 when the CSR was introduced in 2014. Besides, the number of companies spending less than the mandated CSR funds has dropped from 52 in 2014-15 to 33 now. And close to 99 per cent of these companies implemented their planned CSR policy successfully, up from 55 per cent in 2014-15.

Another study of 224 companies by Prime Database shows that the CSR spends as a percentage of required sums went up from 70.19 in 2014-15 to 91.47 in 2018-19. These companies spend most on education and healthcare activities and thus statutory CSR is a government’s way of outsourcing its obligation. Yet such an expenditure is not tax deductible.

In view of all this and despite the fact that Indian companies are by and large averse to philanthropic activities, the above-mentioned penal provisions are ill-advised. A positive alternative would be to make CSR outlay tax deductible for compliance, entitled to further incentive for exceeding the limit and penalise the defaulters by imposing higher tax rate on the unspent part of the required amount.

Y G Chouksey, Pune


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First Published: Tue, August 06 2019. 21:44 IST
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